Posts Tagged ‘Bail-Ins’

Negative interest rates & bail-ins will only work if cash cannot be removed from the system. The threat of a cashless society is seemingly greater than ever. Going cashless will not rid us of people & organisations who wish to commit horrific & illegal acts. This will no doubt drive up demand for tangible currencies such as gold and silver which should be held outside of the banking system.

This bail-in legislation which is being driven by the BIS through the Bank of England, ECB, Federal Reserve and Federal Deposit Insurance Corporation (FDIC) appears designed to protect banks by allowing them to confiscate deposits to prop them up rather than the noble stated objective – “to shield taxpayers”.

Last week Germany reminded us that large deposits are going to be subject to bail-ins if a bank fails. The ghost of the Cyprus bail-in may be returning to the financial stage. Europeans might be buying physical gold from concerns over the financial health of Portugal’s Banco Espirito Santo.

“Bail-ins” enshrined in the 2 laws, means bank’s owners – shareholders, creditors – bondholders & depositors, will be first in line to absorb losses banks will incur, before outside sources of finance may be called upon. Laws also require banks to finance reserve funds to cover further losses, only after bail-ins have been used.

There is an assumption and not a guarantee that in the event of bail-in, only bank deposits of over some arbitrary figures would be vulnerable. It may opt to protect deposits over a lower amount – It is also important that those diversifying deposits do not jump out of the frying pan and into the fire.